Sukhjit Starch & Chemicals Limited

For FY25, Sukhjit Starch reported a revenue from operations of INR1,486.19 crores, marking an 8.4% year-on-year growth. The full-year EBITDA stood at INR109.79 crores, with an EBITDA margin of 7.39%, and net profit reached INR39.48 crores. However, Q4 FY25 saw a dip in performance, with net sales at INR359.14 crores, EBITDA at INR17.43 crores (4.85% margin), and net profit at INR2.4 crores (0.68% PAT margin), indicating pressure during the quarter.

The company faced significant margin pressure in Q4 FY25, primarily due to volatility in maize pricing and an estimated 10% drop in starch prices. Raw material costs increased, but finished goods pricing did not keep pace, leading to lower margins. Management expects these challenges to ease in H2 FY26 with improved maize availability from the rabi harvest and spring crops, which should help stabilize prices.

Sukhjit Starch's manufacturing expansion project is on track. The company's current capacity is 1,600 TPD, operating at 75-80% utilization. By FY26, the capacity is projected to increase to 2,000 TPD, with management expecting to maintain the same utilization level. While the expansion is on track, its full benefits are expected to be visible in Q3 FY26 for starch and Q1 FY26 for derivatives.

The starch industry encountered headwinds from elevated raw material costs and limited export opportunities. Global tariff structures, including US tariffs and Southeast Asian policies, led to production meant for exports being diverted to the domestic market. This diversion created an oversupply situation, contributing to the 10% drop in starch prices and impacting realizations. Management noted that GMO corn and its derivatives are not allowed in India.

In response to market challenges^🌐, Sukhjit Starch is focusing on proactive procurement strategies to ensure consistent raw material supply. The company is also pivoting towards a diverse product mix and customization to mitigate demand and supply pressures. While acknowledging industry-wide overcapacity, the company aims to optimize its capacities and focus on higher-realization products, working closely with customers.

The government's policy to allocate significant quantities of rice to ethanol manufacturers is expected to alleviate pressure on maize demand. Additionally, the release of 2.7 million tons of surplus rice stocks is anticipated to act as a dampener on farm yard pricing, potentially impacting the effectiveness of the MSP (Minimum Support Price) of INR24/kg for maize, which is valid from the Kharif crop.

Management acknowledged that the current market volatility^🌐 and pricing pressures could lead to smaller, marginal players exiting the industry. Despite these challenges, the company remains confident in its long-term value creation, strategic initiatives, and disciplined fiscal management, positioning itself to seize emerging opportunities as global economic conditions and trade situations stabilize.